Tax Filing Disparities: US Complexity vs. Global Streamlining

Filing taxes in the US can be a daunting experience compared to the streamlined processes in many other countries. This article explores the contrasting tax systems of various nations and highlights the complexities that contribute to the challenges faced by American taxpayers.

Divergent Experiences

For Jens Peter de Pedro, filing taxes in his native Sweden was a straightforward process involving a pre-filled return that could be submitted with ease. In contrast, in the US, the tax filing process consumes days and requires significant effort for his wife.

Complexity in the US

The US tax code is notoriously complex, spanning millions of words. This complexity contributes to the average American spending over 13 hours and $270 to file their federal return. Moreover, a significant portion of eligible Americans miss out on valuable tax credits due to the system's intricacies.

Global Approaches

In the UK, the Pay As You Earn system ensures that taxes are deducted directly from paychecks with no need for annual returns. Other countries, such as Sweden, implement similar systems for 9-to-5 workers, eliminating the need for manual reconciliation of earnings and tax liability.

Factors Contributing to Complexity

Several factors contribute to the US tax system's complexity:

* Married Filing Jointly: The combined income of married couples determines their tax bracket, making precise withholding more challenging.
* Tax Credits and Deductions: The US provides assistance through tax credits and deductions for social programs and incentives, adding complexity to the filing process.
* Political Influence: Tax breaks have become increasingly common as lawmakers and interest groups push for benefits such as retirement savings incentives and deductions for homeownership.

Simplification Efforts

Despite the challenges, the US has made some strides towards simplification. The Tax Cuts and Jobs Act of 2017 doubled the standard deduction and reduced itemized deductions. Additionally, the IRS's Direct File program allows taxpayers to submit returns at no cost, simplifying the filing process for many.

Further Simplification Possibilities

To further simplify the US tax system, the following measures could be considered:

* Pre-populating tax returns with information from employers and financial institutions
* The IRS calculating taxpayer liability
* Mandating the early reporting of 1099 forms

These legislative changes, while requiring political will, could significantly reduce the burden of tax filing for Americans. Until then, the US remains far behind many other countries in terms of simplicity and efficiency in its tax system.